DAILY COMMENTARY - 23 APRIL 2019

Merchant West Financial Services Company

Merchant West Capital Markets

USD/ZAR 14.2109 | EUR/ZAR 15.9808 | GBP/ZAR 18.4581

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JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data:

23 April - SA Leading Indicator | US - New Home Sales | US - Richmond Fed Manufacturing 

24 April - SA BERConsumer Confidence 

25 April -  SA PPI | US - Durable Good Orders | Initial Jobless Claims  

26 April - US GDP Annualised | Personal Consumption | GDP Price Index

Market Commentary:

After a pause for the Easter long weekend – investors will come in this morning to notice that the U.S. Dollar steadily pushed higher with risk going in the opposite direction. This means a 1.3% depreciation for the Rand as we currently trade above the 14.15 handle which opens us up to the 14.25/30 levels pre-election jitters as we can expect political noise to get louder in the coming days. There is a slight mixed feel to the open on trading this morning from the Asian markets which is likely to spill over into the remaining sessions for the day ahead. Elsewhere oil is consolidating towards six-month highs on the back of U.S. policy moves in relation to Iran. We are likely to see some selling on the spikes at the current levels with consolidation in a return of liquidity. Two-way risk remains as any rallies will be limited with markets seeking direction after the break (BNP Paribas).   

Stocks in Asia rose marginally on Tuesday as many markets reopened after the long Easter break, while oil jumped to its highest this year as the United States tightened sanctions on Iran. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent, while Japan’s Nikkei was little changed. Chinese stocks extended losses on concerns that Beijing will slow the pace of further policy easing after unexpectedly strong first-quarter economic data last week. Shares in Shanghai slid 0.4 percent after policymakers vowed to fine-tune monetary policy, ensuring it is “neither too tight, nor too loose”. But Stefan Hofer, chief investment strategist at LGT Bank Asia in Hong Kong, said a market adjustment was expected. China’s blue-chip stocks have surged over 30 percent so far this year on expectations of more stimulus and hopes that Beijing and Washington will soon reach a deal to end their bruising trade war. “We’ve had a fantastic run in Chinese equities year-to-date, some profit taking is completely normal. I don’t think China is changing its policy that quickly,” he said (Reuters.com).

On Wall Street, stocks hovered near break-even on Monday as the benchmark S&P 500 index was about 1 percent away from its record high hit in September, while the S&P energy index jumped on higher oil prices. Oil prices jumped more than 2 percent the previous day to a near six-month high, on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports. Washington said it would eliminate in May all waivers allowing eight economies to buy Iranian oil without facing U.S. sanctions. International benchmark Brent crude soared 2.9 percent to settle at $74.04 a barrel on Monday and U.S. West Texas Intermediate crude jumped 2.7 percent to settle at $65.70. Both indexes climbed to nearly six-month highs during the session. U.S. crude futures last traded at $65.87 per barrel, up 0.5 percent on the day. But sharp gains in oil prices have so far had a limited impact on the broader financial markets. “Unless the WTI rises well above $70-75 per barrel, there will be limited impact on U.S. Treasuries and the dollar/yen,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities. In the currency market, the dollar index, which measures the greenback against six major currencies, eased 0.2 percent overnight and last traded steady at 97.303. The index hit a two-week high of 97.485 on Thursday, before the start of Good Friday and the Easter weekend. Against the Japanese yen, the dollar was 0.1 percent softer at 111.82 yen, while the euro was pretty much steady to the greenback at 1.1252 (Reuters.com).

Range for the day: 14.00 – 14.25